Navigating the Economic Landscape

Weekend Read: The Pension Fund That Ate California

Posted by Larry Doyle on February 16, 2013 9:38 AM |

If anybody still has any confidence in the manner in which our nation’s largest state has been run, this is a MUST READ. Steven Malanga of City Journal writes of how California has methodically gone about screwing its future generations.

After spending years dogged by unpaid debts, California labor leader Charles Valdes filed for bankruptcy in the 1990s—twice. At the same time, he held one of the most influential positions in the American financial system: chair of the investment committee for the California Public Employees’ Retirement System, or CalPERS, the nation’s largest pension fund for government workers.

Valdes left the board in 2010 and now faces scrutiny for accepting gifts from another former board member, Alfred Villalobos—who, the state alleges, spent tens of thousands of dollars trying to influence how the fund invested its assets. Questioned by investigators about his dealings with Villalobos, Valdes invoked the Fifth Amendment 126 times.

What happens when public officials are given the keys to the candy store and there is no meaningful oversight or accountability?

I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

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fred

When you multiply Calpers by all the defined benefit public pension systems in the country and assume 1/2 the level of corruption and mismanagement, it is clear why the Fed Reserve has/must pursue ZIRP to prop up asset prices, at least until all defined benefit plans have been converted to defined contribution plans.

This has/will create one bubble after another. When the music finally stops, who will be left out of the “Fed memo loop” holding all the inflated paper? Why the “buy and hold” 401k plan recipients of course.

Sounds eerily similar to the federal deficit spending issue being played out by our Federal politicians in Washington; Keynes must be rolling over in his grave.